Liking Facebook

04/10/2017 2:50 am EST


Richard Moroney

Editor, Dow Theory Forecasts

Facebook (FB) has 1.2 billion active daily users, up 18% from a year ago. For advertisers, that means a huge audience to tap and an irresistible opportunity to tailor marketing messages to specific groups, aligned by similar interests.

Members of Facebook, the largest social network in the world, use the site and its various applications an average of 50 minutes a day, up 25% from 2014.

Part of Facebook's appeal rests in the so-called network effect, where an increasing membership enhances the value for all users, resulting in a positive feedback loop. Its massive scale marks a huge advantage for maintaining market share.

Facebook is expected to increase per-share profits 29% over the next 12 months, more than any other company in its industry. 

Investors have grown accustomed to Facebook topping expectations. It has delivered positive surprises in each of the past 13 quarters for per-share profits and in 12 of 13 quarters for revenue.

Earning a Quadrix Value rank of just 32 out of 100, the stock isn't cheap. But we believe the shares merit a premium, given the firm's highly attractive market position and growth prospects.

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